RealtyTrac Data: Foreclosure Filings Up 7%

The weak U.S. economy isn’t doing the housing market any favors. Foreclosure filings increased by 7% in July from the previous month, according to data out Thursday from RealtyTrac, which tracks default notices, foreclosure auctions and bank repossessions.

The 360,000 foreclosure actions in July represents a 32% increase from the same month last year, and the rising tide of foreclosures raises big hurdles for the housing market at a time when some indicators show it may be stabilizing.

The quartet of “sand states”—Nevada, Arizona, California and Florida—continue to account for more than half of all foreclosures, and Nevada led the nation with the highest foreclosure rate in July for the 31st consecutive month. One in every 56 homes received a foreclosure filing, more than six times the national average. While a new state law slowed the pace of default notices, which were down 18% from June, scheduled auctions and bank repossessions were both up 20% from June. That led to a 4% monthly increase in overall foreclosure activity.

Defaults were up 15% in California, where one in 123 homes received a foreclosure filing, but a slower pace of auctions and bank repossessions led to a 7% overall increase in foreclosure activity.

Other states that rounded out the top 10 included Utah, Idaho, Georgia, Illinois, Colorado and Oregon. One big worry is that foreclosures could pick up beyond the sand states as more prime borrowers are hit by job loss, income reductions and falling home prices. (See state-by-state data here.)

Some economists have argued that housing prices have shown signs of stabilization in recent months in part because foreclosure moratoria earlier this year helped to depress the supply of homes selling out of foreclosure in April, May and June. But the big wild card is how the housing market will hold up if a new supply of foreclosed homes hits.

As David Wessel notes in his column today, a further tumble for housing could step on any nascent economic recovery: “Optimists look at inventories, see a traditional business cycle and predict business will begin investing and hiring. Pessimists look at balance sheets, debt burdens and asset prices, and remain worried.”